TY - JOUR
AU - Doyle,Joseph J., Jr.
AU - Muehlegger,Erich
AU - Samphantharak,Krislert
TI - Edgeworth Cycles Revisited
JF - National Bureau of Economic Research Working Paper Series
VL - No. 14162
PY - 2008
Y2 - July 2008
DO - 10.3386/w14162
UR - http://www.nber.org/papers/w14162
L1 - http://www.nber.org/papers/w14162.pdf
N1 - Author contact info:
Joseph J. Doyle, Jr.
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/452-3761
Fax: 617/258-6855
E-Mail: jjdoyle@mit.edu
Erich Muehlegger
University of California - Davis
Economics Department
One Shields Ave
Davis, CA 95616
E-Mail: emuehlegger@ucdavis.edu
Krislert Samphantharak
IR/PS
UC, San Diego
9500 Gilman Drive
La Jolla, CA 92093-0519
Tel: 858/534-0627
Fax: 858/534-3939
E-Mail: krislert@gmail.com
AB - Some gasoline markets exhibit remarkable price cycles, where price spikes are followed by a string of small price declines until the next price spike. This pattern is predicted from a model of competition driven by Edgeworth cycles, as described by Maskin and Tirole. We extend the Maskin and Tirole model and empirically test its predictions with a new dataset of daily station-level prices in 115 US cities. One innovation is that we also examine cycling within cities, which allows controls for city fixed effects. Consistent with the theory, and often in contrast with previous empirical work, we find that the least and most concentrated markets are much less likely to exhibit cycling behavior; and the areas with more independent retailers that have convenience stores are more likely to cycle. We also find that the average gasoline prices are relatively unrelated to cycling behavior.
ER -